| Mon 14 May 2007, 7:00 | | NTC - Netcare - Unaudited group interim results fo |
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NTC
NTC
NTC - Netcare - Unaudited group interim results for the six months ended 31
March 2007
Network Healthcare Holdings Limited
(Registration number: 1996/008242/06)
(Incorporated in the Republic of South Africa)
(JSE share code: NTC) & (ISIN code: ZAE000011953)
("Netcare", "the Company" or "the Group")
UNAUDITED GROUP INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2007
Group financial highlights
*14% revenue growth in South African operations
*13% growth in South African stand-alone adjusted HEPS to 32,4 cents
*26% EBITDA margin in GHG
*8% growth in interim distributions per share to 13 cents
Group operational highlights
*Commissioned two new hospitals in South Africa
*40% increase in SA nurses and paramedics trained
*GHG integration on track
*Two new facilities opened for the NHS
Sandton, South Africa - 14 May 2007, Network Healthcare Holdings Limited
("Netcare"), an investment holding company listed on the JSE Limited, South
Africa, operating through its subsidiaries, the largest private hospital
networks in South Africa and the United Kingdom ("UK"), announces interim
group results for the six months ended 31 March 2007. The results have been
prepared in accordance with International Financial Reporting Standards
("IFRS").
Overview
Group operating revenue increased 128,9% to R9 176 million, driven by the
acquisitive growth of R4 582 million from General Healthcare Group ("GHG"),
our 50,1% owned UK subsidiary, and solid revenue growth of 14,1% in South
Africa. Operating profit increased by 165,8% to R1 519 million with the
operating profit margin expanding from 14,2% to 16,5%. The South African
business continued to deliver strong results increasing basic headline
earnings per share before GHG related financing costs by 31,2%, from 24,7 to
32,4 cents per share. As expected, the GHG acquisition diluted earnings by 8,7
cents per share in the period, resulting in a decrease of 7,4% in basic
headline earnings per share from 25,6 cents to 23,7 cents. The dilution
resulted from financing costs for the GHG investment and the GHG net loss for
the period of R23 million (GBP1,7 million).
The following table reconciles our South African basic adjusted headline
earnings per share to the Group reported basic headline earnings per share.
Cents per share 31 March 31 March % 30 September
2007 2006 2006
South African basic 32,4 28,7 13 70,5
adjusted?1 headline
earnings per share
Abnormal items - HPFL (4,0) (4,5)
BEE share expense
South African basic2 32,4 24,7 31 66,0
headline earnings per
share
GHG dilution impact on (8,7) 0,9 (9,8)
headline earnings
Basic headline earnings 23,7 25,6 (7) 56,2
per share
1? Before abnormal item (HPFL BEE share expense) and GHG financing related
costs
2? Before GHG financing related costs
Group CEO Richard Friedland said: "Netcare has moved forward to consolidate
its position as a leading provider of high quality, affordable healthcare in
South Africa and the United Kingdom. We have delivered strong operational
performances and have made significant gains in positioning the Group for long-
term sustainable growth in both our core markets. In the six months ended 31
March 2007, we continued to systematically tackle the complex and distinct
healthcare challenges in South Africa and the United Kingdom with commitment
and innovation. We are on track to meet our stated operational and financial
targets for the full year."
Business update
South Africa
Demand for private healthcare in South Africa remains strong, fuelled by new
growth in the medically insured population, which is being supported by
government initiatives and a growing self-pay market. This demand is being
further underpinned by an ageing population, new technology and treatment
options, as well as the increasing incidence of lifestyle diseases. We are
meeting this demand through continued investment and this year we opened two
greenfield hospitals in South Africa, Alberlito Hospital in KwaZulu-Natal and
Blaauwberg Hospital in the Western Cape, adding 204 beds to our portfolio.
During the period we made significant investments in new facilities including
the ICU units at Parklane, Linksfield and Akasia, trauma units at Pretoria
East and Sunward Park, a neuro vascular unit at Unitas, cardiac
catheterisation laboratories at St Augustines and St Annes and upgrades to
several of our facilities.
Netcare has made significant progress in building its primary care network in
South Africa and developing effective lower income healthcare models, anchored
by the recently acquired and now successfully integrated Prime Cure. Fully
accounted for in the six-months under review, Prime Cure added 2,9% growth to
the South African revenue, albeit at a lower operating margin. Viewed in the
context of our strategy to extend the reach of affordable quality healthcare
to all South Africans through innovative, low cost provisioning models, the
shift to higher-volume lower-margin business is a clear indicator of Netcare`s
commitment in this regard. We recently concluded a Public Private Partnership
("PPP") agreement with the Eastern Cape Department of Health for a
refurbishment of Settlers hospital in Grahamstown and the building of a new
hospital in Port Alfred. Netcare, in conjunction with its partners, has a
concession to operate private wards in each hospital.
We have continued to proactively address the chronic skills shortage in
nursing, a key business risk. Our investments in training nurses and retaining
our high calibre nursing staff, as well as introducing a new model of care to
better utilise our nursing skills, pushed expenditure higher and impacted
operating margins in the period. This year, Netcare`s Training Academy will
train some 3 410 nurses and paramedics, an increase of 1 000 from 2006.
Netcare South Africa reported strong results with revenue up 14,1% and
operating profit, before the Health Partners for Life ("HPFL") Black Economic
Empowerment ("BEE") share expense, increased by 9,5%. Headline earnings per
share ("HEPS`) adjusted for the HPFL BEE share expense and GHG financing
related costs increased by 12,9%, to 32,4 cents per share (2006: 28,7 cents).
The Earnings before Interest, Taxation, Depreciation and Amortisation
("EBITDA") margin, before the HPFL BEE share expense, declined from 19,1% to
18,7%.
Hospital and trauma services
Revenue from the hospital and trauma division increased 11,7% to
R3 480 million in the six months ending 31 March 2007 due to strong market
dynamics in South Africa and an increase in the number of doctors using our
facilities in the period, resulting in 4,1% growth in patient days. Total
admissions increased by 7,5%. Maternity cases increased by 6,4% and theatre
cases by 1,5%. The revenue contribution from Netcare 911 increased as a result
of the strong growth in aero-medical services, industrial contracts and road-
side emergency services. The number of patients attended to by Netcare 911
increased by 22,1% to 96 460.
Operating profit from this division increased by 9,3% to R553 million and the
operating margin declined from 16,2% to 15,9% due to increased nurse training
and retention costs as well as costs incurred in commissioning the two new
hospitals.
Ancillary healthcare services
Revenue from the ancillary healthcare services increased by 24,0%
to R947 million due to the 10,3% growth in GP and dentist visits of
1,6 million in the six month period to 31 March 2007, largely attributable to
the acquisition of Prime Cure. Managed care lives increased from 130 000 at 30
September 2006 to 155 000 as Prime Cure secured several new contracts and
continued to experience good momentum in the Government Employee Medical
Scheme (GEMS) membership.
Operating profit from this division increased by 130,2% to
R123 million. Excluding the HPFL BEE share expense of R52 million in the
comparative six month period, operating profit increased by 16,9% and the
operating profit margin decreased from 13,8% to 13,0%. The decrease was
largely due to the increased contribution from Prime Cure at lower margins.
United Kingdom
Over the past six months, GHG has undergone significant restructuring.
Management has made good progress in transforming a largely unaligned group of
hospitals into a far more efficient, compliant network benefiting from
economies of scale and standardised processes as well as the introduction of
new products and services. The integration of GHG has gained traction and
produced excellent results as we moved aggressively to fix its operating base.
Although results for Netcare UK, the National Health Service ("NHS") division
of GHG, were impacted by new project mobilisation costs, its strong NHS
project pipeline augurs well for the future. Despite delays in concluding
several of our NHS contracts, we expect most of these to be finalised in due
course.
The results from our UK business reflect GHG including Netcare UK for the full
six month period. The figures for the comparative period reflect Netcare UK
only as GHG was purchased on 12 May 2006. Revenue for the period under review
was R4 749 million and operating profit was R843 million for the six month
period. Excluding Netcare UK`s mobilisation and bid costs of R19 million the
operating profit was R862 million and the margin was 18,1%. On the same basis,
the EBITDA was R1 240 million and the EBITDA margin was 26,1%, an improvement
from the 24,0% reported to 30 September 2006.
Private hospital services (BMI)
Our primary focus within the BMI hospitals (the private hospital division of
GHG) has been to implement several of the operating efficiencies employed in
South Africa. For example, new nursing models similar to those used in South
Africa have been introduced, which have resulted in an improved allocation of
nursing resources based on capacity utilisation and a 5% reduction in
headcount. The improved control of nursing hours and the management of
unproductive time, coupled with efficient centralised procurement and other
initiatives are expected to save around GBP10 million this year. Further
efficiencies in several areas of the operations will be targeted including
operating theatres, outpatients and administration.
Revenue from our UK private hospital network was R4 582 million for the six
month period ended 31 March 2007. During the period, private patient day
growth was steady as reflected in private medical insurance and self pay case
volume growth. NHS patient day growth was lower than the prior period as a
result of once-off short-term contracts in 2006 not being renewed. Operating
profit was R843 million and the operating profit margin was 18,4%. The EBITDA
margin expanded to 26,5% from the 24,4% reported to 30 September 2006.
Public services (Netcare UK)
In January 2007 Netcare UK opened a unit in Stracathro, the first Independent
Sector Treatment Centre ("ISTC") in Scotland. In February 2007 our first
Commuter Walk-in-Centre ("CWIC") was opened in Leeds. During the period we
were also awarded preferred bidder status on the North and East Yorkshire and
North Lincolnshire ("NEYNL") scheme. A significant amount of effort and
resources were focused on these new projects and several others that we expect
to mobilise in the next 12 months.
Revenue from Netcare UK increased by 29,3% to R168 million for the six month
period ended 31 March 2007. Netcare UK reported an operating loss for the
period of R1 million compared to a profit in the comparative six month period
of R12 million due to an increase in employee costs and other costs incurred
to mobilise the new projects. Mobilisation and NHS bidding costs in the period
were R10 million and R9 million. Excluding such costs, Netcare UK`s EBITDA and
operating profit would be R25 million and R18 million respectively, and EBITDA
and operating profit margins at 15,1% and 10,7%.
Group financial review
Netcare`s results for the six month period ended 31 March 2007 reflect the
benefits of the GHG and Prime Cure acquisitions and recent investments aimed
at improving capacity, efficiencies and the quality of our healthcare
offering. Group operating revenue increased by 128,9% to R9 176 million and
EBITDA was R2 047 million, with the EBITDA margin for the period at 22,3%
compared to 17,4% in the comparative six month period.
Following the acquisitions mentioned above, the consolidated net financial
expenses increased from R67 million to R1 122 million in the period. The Group
was efficiently hedged so as to avoid costs relating to increased interest
rates in the UK.
As expected, the GHG acquisition was dilutive in the period, contributing to a
decrease of 7,4% in basic headline earnings per share from 25,6 cents to 23,7
cents. The South African business increased basic headline earnings before the
HPFL BEE charge and GHG related financing costs by 12,9%, from 28,7 to 32,4
cents per share.
The change in the UK company tax rate from 30% to 28% is expected to result in
a decrease in net deferred tax liabilities of approximately R399 million
(GBP27 million). This amount will only be recognised in income once the rate
reduction has been substantively enacted. We expect the legislation to be
tabled before the House of Commons in July 2007.
Cash generated from operating activities increased to R1 522 million from R483
million which funded a capital distribution of R185 million and capital
expenditure of R607 million in the period. A significant portion of the South
African capital expenditure of R368 million relates to the commissioning of
the two new hospitals, Alberlito and Blaauwberg, and investments in medical
equipment. The GHG capital expenditure of R239 million is largely sustaining
capital for the hospitals and includes the purchase of the Harbour Hospital
previously leased from the NHS.
The balance sheet was impacted by the appreciation of the Rand against the
Pound Sterling over the period with total assets reduced by R858 million as a
result of the currency movement. Total debt net of cash decreased by 1,9% from
30 September 2006 to R30,565 million. R25,448 million of the debt net of cash
is in the GHG group and, as previously indicated is without recourse to the
South African business and secured against the assets in the United Kingdom.
In October 2006 we refinanced the short-term UK acquisition debt with long-
term Propco debt of GBP1 650 million and Opco debt of GBP214 million. In South
Africa, we continued our programme to refinance debt and issued R1,7 billion
guaranteed convertible bonds listed on the Singapore Bond Exchange with a 6%
coupon rate and a conversion premium of 25,4% on a reference price of R12,20.
The Netpartner debt and related zero cost collar derivatives were settled
through the issue of 47,4 million shares, raising R638 million and thereby
reducing cost, complexity and the level of gearing and leverage in the South
African business.
Net financial liabilities decreased from R1 318 million at
30 September 2006 to R116 million over the period, largely as a result of
favourable movements in the mark-to-market value of the UK long-term floating-
to-fixed interest rate swaps in line with the increase in long-term interest
rates in the UK, as well as the settlement of the zero cost collars relating
to Netpartner in South Africa.
The fair value of assets and liabilities of GHG at acquisition date has been
reviewed as required by IFRS 3 - Business Combinations and where necessary,
these values have been amended and the balance sheet as at 30 September 2006
restated. The most significant of the changes was to provide for deferred tax
assets at acquisition of GBP14 million. This adjustment recognises that the
assessed losses in GHG at acquisition date (12 May 2006) have value, which is
likely to be realised and accordingly needs to be brought to account.
Declaration of capital distribution number 16
In accordance with the authority given by the Board of Directors by way of an
ordinary resolution passed on 26 January 2007, the Board of Directors declared
an interim capital distribution (number 16), out of share premium amounting to
13 cents per ordinary share, which represents an 8,3% increase compared to the
previous year interim dividend of 12 cents per share.
In compliance with the requirements of STRATE the following dates are
applicable:
Last date to trade "CUM" the capital distribution ("LDT"): Friday, 6 July 2007
Trading commences "Ex" the capital distribution: Monday 9 July
Record date: Friday, 13 July 2007
Day of payment: Monday, 16 July 2007
Share certificates may not be dematerialised nor rematerialised between
Monday, 9 July 2007 and Friday, 13 July 2007, both dates inclusive.
Outlook
It is the Board`s view that the combined South African and United Kingdom
operations are well positioned to benefit from the scale and the potential
efficiencies of growing demand in the expanding private healthcare markets on
both continents.
Notwithstanding the present dilutive impact of GHG on the Group`s earnings,
the Board is satisfied with the company`s operating profit growth trends and
remains cautiously confident that GHG will make a positive contribution to the
Group`s earnings in advance of our initial expectations. Furthermore, in the
absence of any unforeseen adverse change in regulatory and economic
circumstances in South Africa, the business should continue to improve its
earnings performance.
A tribute to our nurses
As 12 May is International Nurses Day, we pay tribute to members of the
nursing profession. We salute our nurses as members of a noble profession and
commend them for their dedication to caring for others and unselfishly helping
to preserve the sanctity of life. Their devotion, caring and dedication help
us maintain our standards of excellent patient care and provide invaluable
support to the doctors and medical professionals. Our patients place their
lives in the hands of our nurses, feeling safe in the knowledge that they will
give them the best care and attention possible. Our nurses are a lifeline to
those in need and make us proud and we thank them.
On behalf of the Board
Michael I Sacks Dr Richard Friedland Peter Nelson
Chairman Chief Executive Officer Chief Financial Officer
Sandton
10 May 2007
Group balance sheet
At
Note Unaudited Restated Restated
31 March Unaudited Audited
2007 31 March 30 September
Rm 2006 2006
Rm Rm
ASSETS
Non-current assets
Property, plant and 26 837,3 3 222,4 27 246,3
equipment
Goodwill 3 16 409,1 445,6 16 734,6
Intangible assets 291,5 61,1 270,9
Associated companies, 5 264,2 818,4 255,3
investments and loans
Financial asset - 1 386,1 834,3
Derivative financial
instruments
Deferred taxation 3 368,0 28,9 405,7
Total non-current 45 556,2 4 576,4 45 747,1
assets
Current assets
Investments and loans 5 60,6 104,6 51,5
Inventories 597,3 285,7 570,6
Accounts receivable 3 2 915,2 1 588,4 2 706,1
Cash and cash 1 175,5 489,1 1 462,7
equivalents
Total current assets 4 748,6 2 467,8 4 790,9
Total assets 50 304,8 7 044,2 50 538,0
EQUITY AND LIABILITIES
Capital and reserves
Share capital and 1 949,4 1 067,8 1 496,8
premium
Treasury shares (5 555,0) (1 588,9) (5 555,0)
Other reserves 2 033,1 299,0 1 356,9
Retained income 5 203,2 3 765,9 4 938,1
Ordinary shareholders` 3 630,7 3 543,8 2 236,8
equity
Preference share 643,9 643,9
capital and premium
Minority interest 3 794,7 79,8 3 355,4
Total shareholders` 8 069,3 3 623,6 6 236,1
equity
Non-current liabilities
Long-term debt 30 177,0 800,2 29 224,0
Financial liability - 1 502,3 2 152,0
Derivative financial
instruments
Post-retirement benefit 183,1 71,4 293,7
obligations
Deferred lease 60,4 158,3 64,4
liability
Deferred taxation 6 274,7 93,9 6 399,1
Total non-current 38 197,5 1 123,8 38 133,2
liabilities
Current liabilities
Accounts payable 3 2 255,7 1 167,1 2 624,2
Short-term debt 1 453,1 1 125,9 2 952,6
Taxation payable 219,3 3,8 137,8
Bank overdrafts 109,9 454,1
Total current 4 038,0 2 296,8 6 168,7
liabilities
Total equity and 50 304,8 7 044,2 50 538,0
liabilities
Group income statement
For the period ended
Note Unaudited Restated % Restated
31 March Unaudited change Audited
2007 31 March 30 September
Rm 2006 2006
Rm Rm
Revenue 9 175,9 4 009,2 128,9 11 615,9
Cost of sales (5 270,7) (2 063,0) (6 375,9)
Gross profit 3 905,2 1 946,2 5 240,0
Other income 141,1 89,3 214,5
Administrative and other (2 527,8) (1 464,3) (3 886,5)
expenses
Operating profit 6 1 518,5 571,2 165,8 1 568,0
Financial income 7 196,2 51,0 699,4
Financial expenses 3,8 (1 318,0) (118,1) (1 531,4)
Attributable earnings of 15,0 20,4 28,0
associated companies
Profit before taxation 411,7 524,5 (21,5) 764,0
Taxation 3 (110,2) (152,7) (226,7)
Profit for the period 301,5 371,8 (18,9) 537,3
Attributable to:
Ordinary shareholders 278,9 367,8 729,3
Preference shareholders 29,9 12,2
Minority interest (7,3) 4,0 (204,2)
301,5 371,8 537,3
Earnings per share (cents)
Basic earnings per share 22,9 25,4 (9,8) 50,4
Fully diluted basic 24,9 24,8 0,4 48,3
earnings per share
Capital distribution per 13,0 12,0 8,3 27,0
share (cents)
Headline earnings
For the period ended
Note Unaudited Unaudited % Audited
31 March 31 March change 30 September
2007 2006 2006
Rm Rm Rm
Reconciliation of headline
earnings
Profit attributable to 278,9 367,8 (24,2) 729,3
ordinary shareholders
Adjusted for:
Impairment of goodwill 12,2 2,1
Impairment of investments 2,7 20,6
Impairment of land and 14,6
buildings
Profit on disposal of (8,4) (4,2)
property, plant and
equipment
(Profit)/loss on disposal of (2,1) 8,0 (120,4)
subsidiaries/investments
Capital restructuring costs 171,8
Headline earnings 289,0 370,1 (21,9) 813,8
Headline earnings per share
(cents)
Basic 23,7 25,6 (7,4) 56,2
Fully diluted 25,6 25,0 2,4 53,9
Statement of recognised income and expense
For the period ended
Unaudited Unaudited Audited
31 March 31 March 30 September
2007 2006 2006
Rm Rm Rm
Effect of translation of foreign (115,6) (2,3) 1 426,9
entities
Fair value (loss)/gain on (23,5) (0,8) 4,5
investments
Effect of cash flow hedge 1 055,4 (298,6)
accounting
Net investment hedges - fair value (98,1)
losses
Movement in contingency reserve 5,9 1,9
Negative goodwill derecognised 819,8
Other reserve movements 1,1
Actuarial losses taken directly to (12,0)
equity
Net income/(loss)recognised 922,2 (3,1) 1 845,5
directly in equity
Profit for the period 301,5 371,8 537,3
Total recognised income for the 1 223,7 368,7 2 382,8
period
Attributable to:
Ordinary shareholders 755,2 364,7 2 574,8
Preference shareholders 29,9 12,2
Minority interest 438,6 4,0 (204,2)
1 223,7 368,7 2 382,8
Condensed reconciliation of movements in equity
For the period ended
Unaudited Unaudited Audited
31 March 31 March 30 September
2007 2006 2006
Rm Rm Rm
Balance at the beginning of the 6 236,1 3 418,1 3 418,1
period
Net income/(loss) recognised 922,2 (3,1) 1 845,5
directly in equity
Profit for the period 301,5 371,8 537,3
Ordinary shares issued 637,6 687,8 1 677,9
Repurchase of ordinary shares (387,7)
Purchase of treasury shares (691,4) (4 657,5)
Share-based payment reserve 13,7 57,6 77,6
movements
Issue of convertible bond 172,4
Capital distributions (185,0) (217,2) (390,6)
Preference dividends paid (29,9) (12,2)
Other equity movements 0,7
Minorities` share in acquisitions 3 483,8
Issue of preference share capital 643,9
(net of issue expenses)
Balance at the end of the period 8 069,3 3 623,6 6 236,1
Comprising:
Share capital and premium 1 949,4 1 067,8 1 496,8
Treasury shares (5 555,0) (1 588,9) (5 555,0)
Foreign currency translation 1 352,4 (15,3) 1 413,9
reserve
Investment fair value reserve 206,7 224,9 230,2
Cash flow hedge accounting reserve 256,8 (298,6)
Net investment hedging reserve (98,1) (98,1)
Capital redemption reserve 38,5 27,5 24,7
Contingency reserve 7,3 (0,5) 1,4
Share-based payment reserve 97,1 62,4 83,4
Option premium on convertible bond 172,4
Retained income 5 203,2 3 765,9 4 938,1
Ordinary shareholders` equity 3 630,7 3 543,8 2 236,8
Preference shareholders 643,9 643,9
Minority interest 3 794,7 79,8 3 355,4
Total shareholders` equity 8 069,3 3 623,6 6 236,1
Group cash flow statement
For the period ended
Unaudited Unaudited Audited
31 March 31 March 30 September
2007 2006 2006
Rm Rm Rm
Cash flows from operating
activities
Cash received from customers 8 941,3 3 787,9 11 432,6
Cash paid to suppliers and (7 419,6) (3 305,4) (9 315,7)
employees
Cash generated from operating 1 521,7 482,5 2 116,9
activities
Interest paid (946,2) (93,3) (837,7)
Taxation paid (77,9) (133,4) (234,3)
Preference dividends paid (12,2)
Capital distributions paid (185,0) (217,2) (390,6)
Net cash from operating activities 300,4 38,6 654,3
Cash flows from investing
activities
Purchase of property, plant and (606,8) (244,4) (1 013,6)
equipment
Proceeds on disposal of property, 3,7 8,4 49,7
plant and equipment
Additions to intangible assets (40,4) (34,8) (111,2)
(Increase)/decrease in investments (22,9) 22,2 171,1
and loans
Proceeds from disposal of 5,5 9,3
investments and subsidiaries
Interest received 103,0 34,7 150,7
Dividends received 0,7 1,2
Acquisition of businesses (123,2) (16 392,6)
Share buy-backs (682,7) (682,7)
Net cash from investing activities (557,2) (1 019,8) (17 818,1)
Cash flows from financing
activities
Proceeds from issue of ordinary 637,6 687,8 1 677,9
shares
Proceeds from issue of preference 643,9
shares
Repurchase of shares (134,0)
Other equity movements (11,8)
Settlement of post-retirement (110,6)
obligations
Long-term liabilities raised 1 248,2 288,9 25 021,3
Short-term liabilities (1 443,8) 212,5 (7 936,6)
(repaid)/raised
Net cash from financing activities 331,4 1 177,4 19 272,5
Translation effects on cash and (17,6) (1 393,0)
cash equivalents of foreign
entities
Increase in cash and cash 57,0 196,2 715,7
equivalents
Cash and cash equivalents at 1 008,6 292,9 292,9
beginning of period
Cash and cash equivalents at end 1 065,6 489,1 1 008,6
of period
Segment report
For the period ended
Unaudited Unaudited % Audited
31 March 31 March change 30
2007 2006 September
Rm Rm 2006
Rm
INCOME STATEMENT
Revenue 9 175,9 4 009,2 128,9 11 615,9
South Africa 4 426,5 3 879,6 8 184,3
Hospitals and Trauma 3 480,0 3 116,0 11,7 6 526,4
Ancillary healthcare and 946,5 763,6 24,0 1 657,9
Corporate office
United Kingdom 4 749,4 129,6 3 431,6
Private services 4 581,8 3 158,8
Public services 167,6 129,6 29,3 272,8
EBITDA 2 047,1 699,2 192,8 2 121,6
South Africa 826,5 682,4 1 617,1
Hospitals and Trauma 652,2 581,5 12,2 1 361,8
Ancillary healthcare and 174,3 100,9 72,7 255,3
Corporate office
United Kingdom 1 220,6 16,8 504,5
Private services 1 214,2 490,5
Public services 6,4 16,8 (61,9) 14,0
Operating profit 1 518,5 571,2 165,8 1 568,0
South Africa 676,0 559,6 1 350,1
Hospitals and Trauma 553,3 506,3 9,3 1 146,8
Ancillary healthcare and 122,7 53,3 130,2 203,3
Corporate office
United Kingdom 842,5 11,6 217,9
Private services 843,4 215,3
Public services (0,9) 11,6 2,6
Interest paid 1 211,3 93,3 962,0
South Africa 293,1 93,3 214,1 257,1
United Kingdom 918,2 704,9
BALANCE SHEET
Total assets 50 304,8 7 044,2 50 538,0*
South Africa 9 807,5 6 949,3 7 155,0
Hospitals and Trauma 7 826,9 5 210,4 50,2 5 519,9
Ancillary healthcare and 1 980,6 1 738,9 13,9 1 635,1
Corporate office
United Kingdom 40 497,3 94,9 43 383,0
Private services 40 299,6 43 204,1
Public services 197,7 94,9 108,3 178,9
Debt net of cash 30 564,5 1 437,0 31 168,0
South Africa 5 116,4 1 467,0 5 443,9
United Kingdom 25 448,1 (30,0) 25 724,1
*This figure has been restated as a result of adjustments to the provisional
accounting for business combinations. Refer to note 3.
Notes
1. Basis of preparation
The interim financial information for the six months ended 31 March 2007 has
been prepared in compliance with International Financial Reporting Standards
(IFRS) (in particular IAS 34, Interim Financial Reporting), the Listings
Requirements of the JSE Limited and the South African Companies Act, 1973, as
amended.
2. Accounting policies
The accounting policies applied in the presentation of the interim financial
information are consistent with those of the annual financial statements for
the year ended 30 September 2006.
This interim financial information has been prepared on the historical cost
basis, except for certain financial instruments that are measured at fair
value.
3. Restatement of comparative information
In accordance with IFRS 3, Business Combinations, adjustments to the
provisional accounting for business combinations have been made. This has
resulted in retrospective adjustments as follows:
As Adjustments As restated
previously Rm Rm
reported
Rm
Balance sheet
31 March 2006
Goodwill 455,8 (10,2) 445,6
Deferred taxation - asset 18,7 10,2 28,9
30 September 2006
Goodwill 16 906,7 (172,1) 16 734,6
Deferred taxation - asset 195,9 209,8 405,7
Accounts receivable 2 706,7 (0,6) 2 706,1
Accounts payable (2 587,1) (37,1) (2 624,2)
Income statement
31 March 2006
Financial expenses+ 110,6 7,5 118,1
Taxation 160,2 (7,5) 152,7
30 September 2006
Financial expenses+ 1 523,9 7,5 1 531,4
Taxation 234,2 (7,5) 226,7
The above restatements had no effect on profit and equity.
4. Reclassification of comparative information
The following reclassifications to the 31 March 2006 balance sheet
have been made:
Joint venture loans
Loans to and from joint ventures previously included in associated
companies, investments and loans have been reclassified to accounts
receivable and accounts payable.
Unaudited Unaudited Audited
31 March 31 March 30 September
2007 2006 2006
Rm Rm Rm
5. Associated companies,
investments and loans
Non-current
Investments and loans to 251,2 759,9 242,4
associated companies
Loans 13,0 58,5 12,9
264,2 818,4 255,3
Current
Held-for-trading investments 66,1 4,7
Loans 60,6 38,5 46,8
60,6 104,6 51,5
324,8 923,0 306,8
Directors` valuation of 459,7 1 198,4 423,4
investments and loans to
associated companies
6. Operating profit
After charging
Depreciation and amortisation 528,6 128,0 553,6
Operating lease charges 153,9 67,0 225,0
7. Financial income
Dividends received 0,7 0,3 1,2
Fair value adjustments on 2,0 16,0 16,1
investments
Fair value gain on cross- 442,1
currency swap contracts
Fair value gain on interest 14,0
rate swaps
Foreign exchange gains (net) 71,0
Interest received 103,0 34,7 119,6
Profit on disposal of 3,1 9,3
investments
Profit on disposal of 2,4 111,1
subsidiaries
196,2 51,0 699,4
8. Financial expenses
Fair value loss on cross- 83,3
currency swap contracts
Fair value loss on interest 85,4
rate swaps
Foreign exchange losses (net) 1,6 453,8
Impairment of goodwill 19,6 7,5# 9,6#
Impairment of investments and 3,8 7,7 20,6
loans
Interest paid 1 211,3 93,3 962,0
Loss on disposal of 8,0
subsidiaries
1 318,0 118,1 1 531,4
9. Abnormal items
Share-based payment expense - 57,6 64,5
HPFL
10. Commitments
Capital commitments 732,3 365,7 1 054,3
Operating lease commitments 3 366,9 747,9 3 351,7
11. Contingent liabilities
(guarantees and suretyships)
South Africa 235,7 627,9 263,3
United Kingdom 186,6 146,7
422,3 627,9 410,0
+Adjustments have been made to impairment of goodwill.
#This figure has been restated as a result of adjustments to the provisional
accounting for business combinations. Refer to note 3.
Salient features
For the period ended
Unaudited Unaudited Audited
31 March 31 March 30
2007 2006 September
2006
Selected ratios
Operating profit margin (%) 16,5 14,2 13,5
Operating profit return on net 8,1 25,0 7,7
assets (%)
Return on shareholders` equity (%) 19,7 21,5 29,2
Debt/equity ratio (%) 378,8 39,7 499,8
Interest cover (times) 1,4 9,6 1,9
Effective taxation rate (%) 27,1 30,2 27,6
Share statistics
Ordinary shares
Total shares in issue (million) 1 236,8 1 450,0 1 182,4
Weighted average number of shares 1 218,8 1 448,3 1 447,7
(million)
Diluted weighted average number of 1 385,8 1 482,9 1 509,7
shares (million)
Market price per share (cents) 1 385,0 905,0 1 240,0
Currency conversion guide (R:GBP)
Closing exchange rate 14,24 10,88 14,53
Average exchange rate for the 14,07 11,10 11,90
period
Average exchange rate from GHG 13,04
acquisition date (12 May 2006 - 30
September 2006)
Note regarding forward-looking statements
The Company advises investors that any forward looking statements or
projections made by the Company, including those made in this announcement,
are subject to risk and uncertainties that may cause actual results to differ
materially from those projected. Factors that may affect the Group`s
operations are described under "Risk Factors" on the investor relations
website www.netcareinvestor.co.za
More information is available on www.netcare.co.za
Executive Directors: Dr RH Friedland (Chief Executive Officer),
PG Nelson (Chief Financial Officer), IM Davis,
Dr VLJ Litlhakanyane, Dr RN Noach, N Weltman Non-executive Directors: MI
Sacks (Chairman), Dr APH Jammine,
JM Kahn, HR Levin, Prof TR Mokoena, Adv KD Moroka SC, Dr AA Ngcaba,
Dr JA van Rooyen
Company Secretary: J Wolpert
Registered Office: 76 Maude Street (corner West Street), Sandton 2196.
Private Bag X34, Benmore 2010
Transfer Secretaries: Link Market Services South Africa (Proprietary) Limited.
11 Diagonal Street, Johannesburg, 2001. PO Box 4844, Johannesburg, 2000
Sponsors: Merrill Lynch South Africa (Proprietary) Limited. Registration
number 1995/001805/07. 138 West Street, Sandown,
Sandton 2196
Date: 14/05/2007 07:00:08 Produced by the JSE SENS Department.
